U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22480 / September 13, 2012

TWO FORMER OFFICERS OF STERLING FINANCIAL CORP. SUBSIDIARY SENTENCED TO LENGTHY PRISON TERMS AND ORDERED TO PAY $53 MILLION IN RESTITUTION FOR CONDUCTING FINANCIAL FRAUD

The Securities and Exchange Commission announced that on September 11 and 12, 2012, Joseph M. Braas, of Lititz, Pennsylvania, and Michael J. Schlager, of Lancaster, Pennsylvania, were sentenced in a criminal action for orchestrating a sophisticated financial fraud that lasted over five years. Braas and Schlager were two senior officers at Equipment Finance, LLC (“EFI”), formerly a commercial lender to the soft pulp logging industry and wholly-owned subsidiary of Sterling Financial Corp. (“Sterling”), a publicly traded bank holding company based in Lancaster, Pennsylvania. Judge Paul S. Diamond of the United States District Court for the Eastern District of Pennsylvania sentenced Braas to 15 years in federal prison, and Schlager to 20 years in prison, each followed by five years of supervised release. Braas and Schlager were also each ordered to pay $53 million in restitution. Braas and Schlager had each previously pleaded guilty to one count of conspiracy to commit mail fraud, and two counts of mail fraud, all affecting a financial institution.

On January 6, 2011, the Commission filed a civil action against Braas and Schlager based on the same conduct alleged in the criminal case. Without admitting or denying the Commission’s allegations, Braas and Schlager agreed to settle the matter, and Final Judgments were entered as to each. The Commission’s complaint alleged that, from at least February 2002 until April 2007, Braas, EFI’s Vice President and Chief Operating Officer, and Schlager, EFI’s Executive Vice President, orchestrated a pervasive and wide-ranging scheme using fraudulent underwriting and reporting practices to hide mounting losses and defaults within EFI’s commercial loan portfolio from Sterling’s senior management and auditors.

The Commission further alleged that Braas and Schlager were able to subvert virtually every aspect of EFI’s loan process and internal controls. They created fictitious loans for the purpose of making monthly payments on delinquent loans, altered loan documents to hide delinquent and fictitious loans, granted excessive deferrals and resets of delinquent loans to make them appear current, reassigned loan payments to unrelated accounts to fund payments on delinquent loans, and used aliases for borrowers to circumvent EFI’s maximum lending limitations. They also deceived Sterling’s internal and independent auditors through fraudulent accounting entries, false collateral descriptions and appraisals, fabricated UCC filings, and by recruiting vendors to assist in the circumvention of loan confirmation procedures.

As alleged in the complaint, Braas and Schlager caused EFI to report false financial information to Sterling which, in turn, from 2002 through 2006, filed quarterly and annual reports with the Commission containing materially false and misleading financial statements. As a result of the fraud, Sterling ultimately charged off $281 million of EFI finance receivables, which represented a large majority of EFI’s loan portfolio, and approximately 13 percent of Sterling’s total loan portfolio during the period of the fraud.